The following first appeared in the National Post (Financial Post) June 4, 2019
There is the unicorn. There is the chimera. There is the Mothman, the Minotaur, the manticore, and assorted mutants. Then there is the double-dipping university professor. Each of these mythical creatures has the same unassailably assailable pedigree, which is to say, none at all.
You don’t have to have had your ear to the ground in the last few weeks to have heard the vitriolic attacks in Ontario on professors over a certain age who, because they work past mandatory retirement age, are receiving both pension and salary. “Time for Ontario to ditch double-dipping university professors,” reads the headline on a recent Toronto Sun column. The Ford government appears to be poised to adopt legislation that prevents professors from receiving salary and pension at the same time.
There are indeed about 600 professors in Ontario who currently collect both salaries and pensions. These professors are all 71 years of age or older. This is due to the fact that a professor who works past the usual retirement age of 65 effectively makes an election not to receive a pension on that date, but to continue working and receiving only a salary instead. However, the federal Income Tax Act requires all employees to begin taking their pension at the age of 71. Thus, universities have no option but to pay both salary and pension to professors who continue working past the age of 71.
Attacks on this so-called “double-dipping” are based on a number of fundamentally false premises. The most insidious is that “we” taxpayers (as that columnist put it) “pay these people twice.” In fact, it doesn’t cost taxpayers a penny. The salary received by university professors is not paid by the government. It is paid by the universities. Likewise, the pension paid to university professors is paid out of the university pension plan.
The pension plan is funded entirely by contributions by the employee and the employer (the latter as part of the employee’s overall remuneration package) over the course of the employee’s career at the university. All pension payouts derive from these contributions. Nothing comes from the government.
Thus, when a professor finally begins collecting a pension, that pension is entirely funded out of savings that are laboriously accumulated over a period of years. This is vitally important to understanding why “double-dipping” isn’t. First, the salary that the professor receives is for services rendered. Second, the pension payments are a distribution out of the professor’s own accumulated pension savings. The professor is fully entitled to have those savings paid out even while he or she continues to be employed by the university.
This situation is far from unique. Consider a self-employed person who accumulates savings in a personal RRSP — effectively a personally administered pension plan. Just as in the case of a pension plan, an RRSP must be collapsed at age 71. Thereafter, the holder must begin to receive payments, just as an employee must receive pension payments out of his or her employer-administered pension plan.
Now, suppose that this self-employed person decides to collapse the RRSP at age 65 and thus begins to receive payments out of their RRSP/RRIF even while they continue to earn money from work. Who would criticize them? They are perfectly entitled to draw down their savings as they wish. The argument also prevails if our self-employed person collapses the RRSP/RRIF at age 71. In fact, every Canadian who turns 65, and who has made Canada Pension Plan contributions over the course of their working careers, is entitled to receive CPP pension income, regardless of whether they continue to work. No one would suggest bringing out the cudgels for those folks.
But what about government funding of universities? Doesn’t the cost of so-called “double-dipping” flow back to taxpayers via that mechanism?
No. It doesn’t.
Let’s start with the popular misconception that our “public” universities are solely funded by the government. This simply isn’t so. Take the University of Toronto. In the current academic year, operating grants from the province amount to only 24 per cent of the university’s $2.77-billion budget. The largest contributor to the university’s revenues, at 63 per cent, is tuition and fees. Just the tuition and fees charged to foreign students amount to 30 per cent of the university’s budget — more than the government’s contribution.
Moreover, government support for the universities (as a proportion of costs) has been steadily — and rapidly — diminishing. While operating grants from the province covered 34 per cent of the U of T’s budget in 2013, that figure has shrunk to 24 per cent today, a whopping 29-per-cent reduction in a mere six years.
While there has been much heat expended on the issue of professors receiving both salary and pension after the age of 71, there has been little light. Properly understood, there is neither anything offensive about this practice nor any cost to the Ontario taxpayer. Those who would assert otherwise need to have a long, hard look at the facts before lavishly victimizing the innocent.
